If I file and pay my New Mexico income tax late because of a preparer or software mistake, can I get the penalties and interest waived for good faith?

Plain-English summary

George and Carol Scott, New Mexico residents, ran late on their 2021 personal income taxes. They made no estimated tax payments during 2021, missed the October 17, 2022 extended filing deadline, filed their New Mexico return only in July 2023, and paid the tax principal ($12,920) in January 2024 — after the Department had already assessed them. The Department's total assessment was $15,906.86 (tax $11,920, civil penalty $2,584, interest, and an underpayment penalty). After the Scotts paid the principal and a $1,000 rebate was applied, what remained in dispute was $3,073.09 — interest of $397.84, a civil penalty of $2,584 (capped at 20% of the tax), and a $91.25 underpayment penalty.

The Scotts didn't dispute that they owed the tax. They protested only the penalties and interest, asking the Hearing Officer for leniency because the failures were unintentional: their preparer's "Drake" software erroneously reported that estimated payments had been made, and a federal e-file attempt on October 17, 2022 had been rejected by the IRS for lack of an Identity Protection PIN. The Hearing Officer found the witnesses credible but denied the protest. Under NMSA 1978, Section 7-1-69(A), the civil negligence penalty is mandatory whenever a taxpayer's failure to file or pay meets the definition of negligence — which includes mere "inaction where action is required," even if inadvertent and without intent to evade. A software glitch showing phantom payments does not satisfy the duty to actually remit funds, and while reasonable reliance on a professional can excuse some things, the regulations say it does not excuse a late-filed return. The estimated-tax underpayment penalty (Section 7-2-12.2) and interest (which stopped accruing when the principal was paid) were also compelled by statute. Because the Scotts offered no evidence establishing a reasonable basis for the late filing and payment, they failed to overcome the assessment's presumption of correctness.

What this means for you

Anyone who files or pays New Mexico tax late

Good intentions and honest mistakes generally do not wipe out New Mexico's civil penalty. The negligence penalty under Section 7-1-69(A) is mandatory and is designed to reach even unintentional failures to pay. "Negligence" is defined broadly — carelessness, inadvertence, or simply not acting when action was required all qualify.

People who rely on tax software or a preparer

If your software or preparer says a payment was made, confirm the money actually left your account. A return that reports a payment is not the same as remitting it, and the taxpayer — not the software — bears the consequence. Critically, relying on an accountant does not excuse a late-filed return under Regulation 3.1.11.11 NMAC, even though reasonable reliance can sometimes excuse other failures.

Self-employed and 1099 earners

If tax isn't withheld from your pay, New Mexico expects quarterly estimated payments (based on the prior year's tax or 90% of the current year's). Skipping them triggers a separate underpayment penalty under Section 7-2-12.2 that the Hearing Officer described as "compelled by law."

Anyone hoping for penalty abatement

New Mexico allows a penalty waiver only on a written finding of reasonable cause and no willful neglect (Section 7-1-69(B)). You have to actually present evidence supporting reasonable cause; a rejected federal filing that doesn't even show an attempt to file the state return won't get you there.

Common questions

Q: My failure to pay was an honest mistake. Doesn't that avoid the penalty?
A: No. The civil negligence penalty is mandatory and specifically reaches unintentional failures. "Negligence" includes inadvertence and inaction where action is required, so lacking intent to evade does not, by itself, avoid it.

Q: My tax software showed the payment as made. Isn't that reasonable reliance?
A: The Hearing Officer held that a return reporting a payment does not satisfy the requirement to actually remit funds. The money was never paid, so the software's error didn't excuse the late payment.

Q: My accountant handled it — shouldn't reliance on a professional excuse the late return?
A: Regulation 3.1.11.11 NMAC lists reasonable reliance on competent tax advice as a non-negligence indicator, but it expressly says a failure to timely file a return is not excused by reliance on an agent.

Q: Why did I still owe an underpayment penalty on top of everything?
A: Because no estimated tax was paid during the year. New Mexico requires quarterly estimated payments for income not covered by withholding, and the underpayment penalty under Section 7-2-12.2 is required when they aren't made.

Q: Can I rely on this decision for my own situation?
A: Not directly. A Decision and Order resolves one taxpayer's protest on its specific facts and is not a general ruling or advisory opinion of the Department. It does show how strictly the negligence-penalty rules are applied.

Citations and references

Statutes and rules:

• NMSA 1978, § 7-2-3 (1981) — tax imposed on the net income of every resident individual
• NMSA 1978, § 7-1-17(C) (2007) — assessments are presumed correct
• NMSA 1978, § 7-1-69(A) (2007) — mandatory civil penalty for negligence without intent to evade
• NMSA 1978, § 7-1-69(B) — penalty waiver only on a written finding of reasonable cause and no willful neglect
• NMSA 1978, § 7-2-12.2(B), (G) (2011) — estimated-tax requirement and underpayment penalty
• NMSA 1978, § 7-1-3(Z) (2019) — "tax" includes interest and civil penalty
• NMSA 1978, § 7-1B-8(F) (2019) — 90-day hearing requirement
• Regulation 3.1.11.10 NMAC — definition of "negligence"
• Regulation 3.1.11.11 NMAC — indicators of non-negligence; reliance on an agent does not excuse late filing
• Regulation 3.1.6.13 NMAC — presumption of correctness extends to penalty and interest
• Regulation 3.1.6.12 NMAC — taxpayer's burden of production

Cases:

• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013 ("shall" makes the penalty mandatory)
• El Centro Villa Nursing Center v. Taxation & Revenue Dep't, 1989-NMCA-070 (Section 7-1-69(A) penalizes unintentional failure to pay)
• Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep't, 2023-NMCA-039 (burden of production/persuasion; presumption of correctness)
• Archuleta v. O'Cheskey, 1972-NMCA-165 (assessment presumed correct; taxpayer bears burden)
• N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099 (trier of fact weighs evidence and credibility)
• MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003-NMCA-21 (burden shifts to Department once presumption rebutted)
• Process Equip. & Serv. Co. v. N.M. Taxation & Revenue Dep't, 2023-NMCA-060 (a single credible witness can be substantial evidence)
• Chevron U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-50 (agency regulations interpreting a statute get substantial weight)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: George D and Carol Scott
• Decision PDF: D&O 25-07

Original ruling text

1 STATE OF NEW MEXICO
2 ADMINISTRATIVE HEARINGS OFFICE
3 TAX ADMINISTRATION ACT

4 GEORGE D. AND CAROL SCOTT
5 v. Case Number 24.08-027A
6 D&O No. 25-07
7 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

8 DECISION AND ORDER

9 On April 17, 2025, Hearing Officer Ignacio V. Gallegos, Esq., conducted a merits

10 administrative hearing in the matter of the tax protest of George D. and Carol Scott (“Taxpayer”

11 or “Taxpayers”) pursuant to the Tax Administration Act and the Administrative Hearings Office

12 Act. Theodore Krapin, Enrolled Agent, appeared on behalf of Taxpayers, and as Taxpayers’ sole

13 witness. Staff Attorney Timothy Williams appeared at the hearing, representing the opposing

14 party in the protest, the Taxation and Revenue Department (“Department”). Department protest

15 auditor Sonya Varela appeared at the hearing as a witness for the Department. Taxpayer

16 submitted Exhibit 1, an e-file rejection notice, and the Department submitted no exhibits at the

17 hearing. The hearing officer preserved an audio recording of the hearing.

18 Based on the evidence in the record, after making findings of fact, the hearing officer finds

19 that Taxpayer failed to overcome the presumption of correctness that attached to the Department’s

20 initial assessment, and Taxpayer has also failed to meet the burden of proof to establish proper and

21 timely filing of Personal Income Tax Returns and making timely payments for the tax year in

22 question. The Department established that the Assessment was proper. Therefore, the Taxpayer’s

23 protest must be denied. IT IS DECIDED AND ORDERED AS FOLLOWS:

24 FINDINGS OF FACT

In the Matter of the Protest of George D. and Carol Scott, page 1 of 15.
1 Procedural findings

2 1. On December 7, 2023, the Department issued a Notice of Assessment of Taxes

3 and Demand for Payment informing Taxpayer that Personal Income Tax for the tax year ending

4 December 31, 2021, was owed in the amount of $11,920.00, penalty of $2,584.00, interest of

5 $1,311.61, and underpayment penalty of $91.25 for a total assessment of $15,906.86. [Letter ID#

6 L1762966128; Administrative File].

7 2. On January 29, 2024, Taxpayers submitted their protest form with an

8 accompanying letter and documents. The protest challenged the assessment, asserting return

9 showed payment of estimated tax payments, and proof of payment of principal tax. Taxpayer

10 submitted proof of payment of $12,920.00, covering the underlying tax, and one thousand dollars

11 applied to other matters covered by the assessment paid earlier in January, 2024. [Protest letter;

12 Administrative File].

13 3. On March 20, 2024, the Department issued a letter acknowledging the protest of

14 personal income tax assessment in the amount of $3,073.07 for the period ending December 31,

15 2021. [Letter ID# L1862299248; Administrative File].

16 4. On August 19, 2024, the Department filed a Request for Hearing asking that the

17 Taxpayer’s protest be scheduled for a scheduling hearing. [Administrative File].

18 5. On August 19, 2024, the Department filed its Answer to Protest, alleging that

19 Taxpayers’ tax returns for 2021 were due on April 18, 2022, and a file extension granted them

20 until October 17, 2022, but a return was not actually filed until July 3, 2023; and alleging that

21 Taxpayers should have but did not make estimated tax payments. The Answer acknowledged

22 Taxpayers’ payment of $13,920 (incorrectly stating the amount) on January 3, 2024, beyond the

23 date the taxes should have been paid on April 18, 2022. [Administrative File].

In the Matter of the Protest of George D. and Carol Scott, page 2 of 15.
1 6. On August 23, 2024, the Administrative Hearings Office filed and sent a Notice

2 of Telephonic Scheduling Hearing, setting the matter for a scheduling hearing on September 13,

3 2024. Notice was provided to the parties and representatives by email and USPS First Class

4 Mail. [Administrative File].

5 7. On September 13, 2024, the Department filed its Amended Answer to Protest,

6 asserting that payment had been made in the amount of $12,920.00 rather than the amount of

7 $13,920.00, which had been incorrectly stated in its original answer. [Administrative File].

8 8. On September 13, 2024, the undersigned Administrative Hearing Officer

9 conducted a scheduling hearing by telephone conference. The Department was represented by

10 Attorney Timothy Williams, accompanied by protest auditor Sonya Varela. The Taxpayers’

11 representative Rebecca Meyers did not appear by telephone on behalf of Taxpayers. An audio

12 recording of the hearing was preserved. Parties present agreed that the hearing occurred within

13 90-days of the Department’s request for hearing. [Administrative File; Hearing Record of

14 9/13/24].

15 9. On September 17, 2024, the Administrative Hearings Office filed and sent a

16 Notice of Second Telephonic Scheduling Hearing, setting the matter for a second scheduling

17 hearing on October 24, 2024. Notice was provided to the parties and representatives by email

18 and USPS First Class Mail. [Administrative File].

19 10. On October 24, 2024, the undersigned Administrative Hearing Officer conducted

20 a second scheduling hearing by telephone conference. The Department was represented by

21 Attorney Timothy Williams. The Taxpayers’ representative Rebecca Meyers appeared by

22 telephone on behalf of Taxpayers. An audio recording of the hearing was preserved. Parties

In the Matter of the Protest of George D. and Carol Scott, page 3 of 15.
1 present agreed that the hearing occurred within 90-days of the Department’s request for hearing.

2 [Administrative File; Hearing Record of 10/24/24].

3 11. On October 24, 2024, the Administrative Hearings Office filed and sent a Notice

4 of Third Telephonic Scheduling Hearing, setting the matter for a second scheduling hearing on

5 January 13, 2025. Notice was provided to the parties and representatives by email and USPS

6 First Class Mail. [Administrative File].

7 12. On January 13, 2025, the undersigned Administrative Hearing Officer conducted

8 a third scheduling hearing by telephone conference. The Department was represented by

9 Attorney Timothy Williams. The Taxpayers’ representative Theodore Krapin appeared by

10 telephone on behalf of Taxpayers. An audio recording of the hearing was preserved.

11 [Administrative File; Hearing Record of 1/13/25].

12 13. On January 14, 2025, the Administrative Hearings Office filed and sent a

13 Scheduling Order and Notice of Administrative Hearing, setting the matter for a videoconference

14 merits hearing on April 17, 2025. Notice was provided to the parties by email and USPS First

15 Class Mail. [Administrative File].

16 14. On April 17, 2025, the undersigned Administrative Hearing Officer commenced a

17 merits hearing by videoconference. The Department was represented by Attorney Timothy

18 Williams. Taxpayers George D. and Carol Scott were represented by Enrolled Agent Theodore

19 Krapin, who appeared by videoconference. Mr. Krapin was Taxpayers’ sole witness and Sonya

20 Varela was the Department’s sole witness. The Hearing Officer preserved an audio recording of

21 the hearing. [Administrative File].

22 15. The documents contained in the administrative file and Taxpayers’ Exhibit 1 were

23 admitted by stipulation of the parties. [Administrative File].

In the Matter of the Protest of George D. and Carol Scott, page 4 of 15.
1 Substantive findings

2 16. Taxpayers are residents of New Mexico. [Administrative File].

3 17. For tax year 2021, Taxpayers did not make New Mexico estimated tax installment

4 payments. [Examination of T. Krapin; Examination of S. Varela; Administrative File].

5 18. Taxpayers used the services of a tax preparer in 2022, when attempting to file

6 their taxes following the grant of a federal filing extension. The filing deadline for tax year 2021

7 personal income taxes was April 18, 2022. With an extension, the filing deadline was extended

8 to October 17, 2022. [Examination of T. Krapin].

9 19. After receiving permission from Taxpayers to file federal and New Mexico taxes

10 electronically on October 6, 2022, the tax preparer attempted to file Taxpayers’ federal return for

11 2021 on October 17, 2022. The federal submission was rejected by the Internal Revenue Service

12 (IRS) for lack of an Identity Protection Personal Identification Number (IPPIN). [Examination of

13 T. Krapin; Exhibit 1; Administrative File].

14 20. Following the rejection of the IRS filing, no attempt to file New Mexico personal

15 income tax returns was made in October of 2022. The New Mexico Personal Income Tax (PIT)

16 return was not filed until July of 2023. [Examination of T. Krapin; Exhibit 1; Administrative

17 File].

18 21. The PIT return was completed using the “Drake” tax preparation software. The

19 software the tax preparer used erroneously reported that Taxpayer had made “other” payments of

20 the tax due [PIT-1, line 30]. Neither Taxpayer nor the tax preparer caught this error.

21 [Examination of T. Krapin; Administrative File].

22 22. This Taxpayer was required to make New Mexico PIT estimated tax payments.

23 Taxpayers did not make estimated payments. There was no evidence that Taxpayers made any

In the Matter of the Protest of George D. and Carol Scott, page 5 of 15.
1 attempt to pay the 2021 tax principal due until January of 2024, following the issuance of the

2 assessment. [Examination of T. Krapin; Examination of S. Varela; Administrative File].

3 23. Taxpayer made no New Mexico income tax withholding payments. [Examination

4 of S. Varela; Administrative File].

5 24. Taxpayers paid a single tax principal payment of $12,920 on January 3, 2024.

6 [Examination of S. Varela; Administrative File].

7 25. The Taxpayers were entitled to a $1000 credit or rebate for 2021 taxes, which had

8 not been applied in their PIT return. [Examination of S. Varela; Administrative File].

9 26. Due to the unapplied credit, the payment of $12,920 resulted in an overpayment

10 of $1,000, which the Department credited to outstanding interest and penalties under the

11 assessment. [Examination of S. Varela; Administrative File].

12 27. The final balance of the assessment is $3,073.09, which includes interest of

13 $397.84, civil penalty of $2,584.00, and underpayment penalty of $91.25. Penalty was capped at

14 20% of the tax principal. Interest stopped accruing when the tax principal was paid on January 3,

15 2024. [Examination of S. Varela; Administrative File]. 1

16 DISCUSSION

17 Taxpayer contested only the penalties and interest assessed by the Department, asking to

18 have leniency since the omissions were unintentional. Taxpayer presented a single exhibit that

19 detailed the Taxpayer’s attempt and failure to file a federal return in 2022, for the tax year ending

20 December 31, 2021. The testimony of the witnesses was credible, but, even so, Taxpayer was

21 unable to overcome the presumption of correctness that attached to the assessment. Taxpayer

1
The amount attested to of $3,073.09 differs by two cents from the amount acknowledged at issue in FOF #3, which
states the amount at protest is $3,073.07, taken from non-itemized Letter ID # L1862299248. The discrepancy is de
minimis and does not affect the resolution of the protest.

In the Matter of the Protest of George D. and Carol Scott, page 6 of 15.
1 failed to make 2021 New Mexico Personal Income Tax estimated payments, failed to file a 2021

2 PIT-1 return by the extended deadline of October 17, 2022, did not file a 2021 return until July

3 of 2023, and did not pay any tax for 2021 until January of 2024. Each of these omissions,

4 resulting in late filing and late payment, justify the assessment of civil penalty, interest, and

5 estimated tax underpayment penalty. The assessment is upheld.

6 Presumption of correctness

7 Under NMSA 1978, Section 7-1-17 (C) (2007), the assessment issued in this case is

8 presumed correct. Consequently, Taxpayer has the burden to overcome the assessment. See

9 Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428. Unless otherwise specified, for the

10 purposes of the Tax Administration Act, “tax” is defined to include interest and civil penalty. See

11 NMSA 1978, Section 7-1-3 (Z) (2019); see also Regulation 3.1.1.16 (12/29/2000). Under

12 Regulation 3.1.6.13 NMAC, the presumption of correctness under Section 7-1-17 (C) extends to

13 the Department’s assessment of penalty and interest. See Chevron U.S.A., Inc. v. State ex rel.

14 Dep't of Taxation & Revenue, 2006-NMCA-50, ¶16, 139 N.M. 498, 503 (agency regulations

15 interpreting a statute are presumed proper and are to be given substantial weight). Accordingly, it

16 is a taxpayer’s burden to present some countervailing evidence or legal argument to show that

17 they are entitled to an abatement, in full or in part, of the assessment issued in the protest. See

18 N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099, ¶8; see also Regulation

19 3.1.6.12 NMAC. When a taxpayer presents sufficient evidence to rebut the presumption, the

20 burden shifts to the Department to show that the assessment is correct. See MPC Ltd. v. N.M.

21 Taxation & Revenue Dep't, 2003-NMCA-21, ¶13, 133 N.M. 217.

22 The Taxpayer’s burden established under the presumption of correctness is a burden of

23 producing evidence that tends to support Taxpayer’s position. Gemini Las Colinas, LLC v. New

In the Matter of the Protest of George D. and Carol Scott, page 7 of 15.
1 Mexico Taxation & Revenue Department, 2023-NMCA-039, ¶ 16, 531 P.3d 622. Once the

2 Taxpayer has produced the evidence in support of Taxpayer’s position, the Department may

3 present its evidence in support of the assessment, then it is the responsibility of the Hearing

4 Officer to weigh the evidence and determine the outcome of the protest. Id., ¶ 17.

5 Here, the only evidence presented by Taxpayers was a document that related to an

6 attempted federal IRS filing, and the testimony of an accountant who did not participate in the

7 preparation or attempt at filing either the federal or the state return. Taxpayer’s accountant

8 repeatedly acknowledged that the assessment was not made in error but asserted that Taxpayer

9 and accountancy errors were mistakes in good faith, and urged the Hearing Officer to forgive and

10 waive the penalties assessed. Taxpayer acknowledged and accepted the imposition of interest.

11 The documentation of a failed attempt at federal filing does not overcome the burden of

12 production of evidence that might support a rationale to overturn the presumption of correctness

13 that attached to the assessment of the state personal income tax at issue. See Gemini Las Colinas,

14 LLC v. New Mexico Taxation & Revenue Department, 2023-NMCA-039, ¶ 23, 531 P.3d 622,

15 629. (“[D]etermining whether the taxpayer has overcome the presumption of correctness is the

16 first step in resolving a tax protest, and that it will only be the last step if the taxpayer fails to

17 overcome the presumption.”).

18 Personal Income Tax Act.

19 The assessment in this protest arises from an application of the Income Tax Act, NMSA

20 1978, Sections 7-2-1 through 7-2-39. In New Mexico, “tax is imposed…upon the net income of

21 every resident individual.” Section 7-2-3. Taxpayers did not protest the imposition of tax on their

22 income. The assessment of underpayment penalty was based on the non-payment of estimated tax,

In the Matter of the Protest of George D. and Carol Scott, page 8 of 15.
1 and civil penalty and interest was based on the untimely filing of a PIT return and untimely payment

2 of the Personal Income Tax when due.

3 Civil negligence.

4 Under NMSA 1978, Section 7-1-69 (A) (2007), when a taxpayer fails to pay taxes due to

5 the State or to file returns because of negligence or disregard of rules and regulations, but

6 without intent to evade or defeat a tax, the Department must impose a civil negligence penalty

7 based on the tax due. “There shall be added to the amount assessed a penalty” under Section 7-

8 1-69 (A). The use of the word “shall” makes the imposition of penalty mandatory in all

9 instances where a taxpayer’s actions or inactions meet the legal definition of “negligence.” See

10 Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013, ¶22, 146 N.M. 24, 206

11 P.3d 135 (use of the word “shall” in a statute indicates the provision is mandatory absent clear

12 indication to the contrary). Here undisputed facts presented at the hearing have both a failure to

13 timely pay taxes when due, and a failure to file a timely return when due for the tax year ending

14 December 31, 2021.

15 Both the Department and Taxpayer agreed that there was no willful attempt to evade tax in

16 this case. The parties’ dispute rests on whether the non-payment resulted from “negligence or

17 disregard of rules and regulations.” Concerning the timeliness of payments, Taxpayer’s accountant

18 testified that the software created an error, showing that the estimated payments had been made,

19 when they had not been paid. The fact is that payments were not made, regardless of what the

20 software erroneously reported in the return. A representation in the return that payments were made

21 does not satisfy the requirement to remit actual funds to the Department.

22 Negligence can be found in several ways. Regulation § 3.1.11.10 NMAC (1/15/01) defines

23 “negligence” as “failure to exercise that degree of ordinary business care and prudence which

In the Matter of the Protest of George D. and Carol Scott, page 9 of 15.
1 reasonable taxpayers would exercise under like circumstances; inaction by taxpayers where action is

2 required; inadvertence, indifference, thoughtlessness, carelessness, erroneous belief or inattention.”

3 Non-payment of personal income tax is certainly negligence under the definition, here, as “inaction”

4 when “action is required.” Even if unintentional or inadvertent, the inaction is negligence. See El

5 Centro Villa Nursing Center v. Taxation & Revenue Department, 1989-NMCA-070, ¶ 10, 108 N.M.

6 795, 779 P.2d 982 (Section 7-1-69 (A) is designed specifically to penalize unintentional failure to

7 pay tax.).

8 Additionally, the non-filing of a return when due, is also negligent (“inaction” when “action

9 is required”). The Taxpayers asserted that accountants made no attempt to file a New Mexico PIT

10 return because of the rejection of the IRS filing. Regulation 3.1.11.11 (1/15/01) provides indicators

11 of nonnegligence. One of these indicators, section (D), provides relief from negligence penalties if:

12 “the taxpayer proves that the failure to pay tax or to file a return was caused by reasonable reliance

13 on the advice of competent tax counsel or accountant as to the taxpayer's liability after full

14 disclosure of all relevant facts; failure to make a timely filing of a tax return, however, is not

15 excused by the taxpayer's reliance on an agent.” Regulation 3.1.11.11 NMAC. There was no

16 justification for non-filing. Additionally, Taxpayer did not present evidence or argument that would

17 qualify for penalty abatement under NMSA 1978, Section 7-1-69(B), which permits waiver of

18 penalty only upon a written finding by the Department that the failure was due to reasonable cause

19 and not willful neglect. No such showing was made.

20 The evidence presented is specific as to the federal 1040 attempted filing, but does not

21 explicitly extend to submission of a New Mexico PIT return. In fact, evidence presented was that

22 no attempt was made to file a PIT return on October 17, 2022, and the PIT return did not get

23 filed until July of 2023. The non-filing of a PIT return when due was clearly negligence.

In the Matter of the Protest of George D. and Carol Scott, page 10 of 15.
1 Therefore, in a strict sense, the Taxpayers by producing no corroborating documentation

2 or testimony failed to overcome the burden of production, therefore failed to overcome the

3 presumption of correctness that attached to the assessment. Gemini Las Colinas, 2023-NMCA-

4 039, ¶ 16.

5 Credibility of witnesses plays a role in the decisions of the Hearing Officer. “[I]t is well-

6 settled in New Mexico that the testimony of a single witness, if found credible by the fact-finder, is

7 sufficient to constitute substantial evidence.” Process Equip. & Serv. Co., Inc. v. New Mexico

8 Taxation Revenue Dep't, 2023-NMCA-060, ¶ 31, 534 P.3d 1043, 1053, cert. denied sub nom.

9 Process Equip. v. NM Tax & Rev, 2023-NMCERT-010, ¶ 31, 547 P.3d 102. And

10 “[i]t is the sole responsibility of the trier of fact to weigh the testimony, determine the credibility of

11 the witnesses, reconcile inconsistencies, and determine where the truth lies.” N.M. Taxation &

12 Revenue Dep’t v. Casias Trucking, 2014-NMCA-099, ¶ 23, 336 P.3d 436; see also In the matter of

13 the Protest of Trader Barb’s Old Town, Decision and Order #23-10, issued May 10, 2023, 2023

14 WL 3601271 (non-precedential). Here, Taxpayer’s representative and witness was credible, and the

15 Department witness was credible. However, the documentation provided and testimony did not

16 present any reasonable basis for non-filing or non-payment of taxes when due, and is insufficient to

17 overcome the presumption.

18 Underpayment penalty.

19 The Department assessed an underpayment penalty pursuant to NMSA 1978, Section 7-2-

20 12.2 (G) (2011). In instances where a taxpayer is a W-2 employee, the employer withholds and pays

21 taxes for the individual on a regular basis. Where a taxpayer receives a 1099, the individual is

22 expected to make regular payments of estimated personal income tax based on the prior year’s tax,

23 or at least 90% of the current year’s anticipated tax. See Section 7-2-12.2 (B).

In the Matter of the Protest of George D. and Carol Scott, page 11 of 15.
1 Because the Taxpayer’s estimated taxes were not paid when due, the underpayment penalty

2 was imposed. Assessment of the underpayment penalty was compelled by law and was properly

3 assessed in this case.

4 Conclusion.

5 Taxpayer has an initial burden of production to overcome the presumption of correctness of

6 the assessments and the ultimate burden of persuasion by the preponderance of evidence to prevail

7 in this protest. See Gemini Las Colinas, LLC, 2023-NMCA-039, ¶ 29. Taxpayer presented

8 evidence in the form of testimony and documentation that a federal return was submitted and

9 rejected on October 17, 2022. However, there was no evidence to suggest that state estimated taxes

10 for 2021 were paid timely, or that an attempt to file New Mexico Personal Income Tax return was

11 made at the same time. The evidence presented is insufficient to overcome the presumption of

12 correctness and Taxpayers conceded that the assessment was correctly issued. Taxpayer was unable

13 to overcome the presumption of correctness in the assessment, and unable to overcome the burden

14 of a preponderance of proof or persuasion as to show the assessment was made in error. See

15 Gemini, 2023-NMCA-039, ¶ 29. The Department showed that Taxpayer did not pay the personal

16 income tax due for 2021 in equal quarterly installments, or by April 17, 2022. The Department

17 showed that penalties and interest accrued on the outstanding tax principal up until January 3, 2024,

18 when the underlying tax was paid in full. As of the date of the hearing, after applying the

19 overpayment of $1000 to interest, the Taxpayer’s outstanding debt for 2021 is $3,073.09.

20 CONCLUSIONS OF LAW

21 A. Taxpayer filed a written protest to Department’s Notice of Assessment [Letter ID

22 No. L1762966128] and jurisdiction lies over the parties and the subject matter of this protest. See

In the Matter of the Protest of George D. and Carol Scott, page 12 of 15.
1 NMSA 1978, Section 7-1-24 (A), (B) and (E) (2019); see also NMSA 1978, Section 7-2-3 (1981)

2 and Section 7-2-12 (2016).

3 B. The first and second scheduling hearing were timely set and held within 90-days of

4 the Department’s hearing request under NMSA 1978, Section 7-1B-8 (F) (2019).

5 C. Taxpayer bears the burden of overcoming the presumption of correctness that

6 attached to the Department’s Assessment. Taxpayer failed to overcome the presumption of

7 correctness, as the evidence presented did not establish timely payment of state taxes, or timely

8 submission of a Personal Income Tax Return. See NMSA 1978, Section 7-1-17 (C) (2007); see

9 also Regulation §3.1.8.10 NMAC (08/30/2001); see also Gemini Las Colinas, LLC v. New Mexico

10 Taxation & Revenue Department, 2023-NMCA-039, ¶ 16, 531 P.3d 622; see also Regulation

11 3.1.6.12 NMAC.

12 D. Taxpayer’s evidence, weighed against the Department’s evidence was insufficient to

13 find by a preponderance of evidence that Taxpayer timely paid New Mexico Personal Income Tax

14 for year 2021. The Department met its burden of establishing a preponderance of evidence to

15 support that the Assessment was properly issued. See NMSA 1978, Section 7-1-18 (C) (2021); see

16 also Gemini Las Colinas, LLC v. New Mexico Taxation & Revenue Department, 2023-NMCA-

17 039, ¶ 29, 531 P.3d 622.

18 For the foregoing reasons, the Taxpayer’s protest IS DENIED.

19 DATED: August 1, 2025

20
21 Ignacio V. Gallegos

In the Matter of the Protest of George D. and Carol Scott, page 13 of 15.
1 Hearing Officer
2 Administrative Hearings Office
3 Post Office Box 6400
4 Santa Fe, NM 87502

5 NOTICE OF RIGHT TO APPEAL

6 Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties have the right to appeal this

7 decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the

8 date shown above. If an appeal is not timely filed with the Court of Appeals within 30 days, this

9 Decision and Order will become final. Rule of Appellate Procedure 12-601 NMRA articulates

10 the requirements of perfecting an appeal of an administrative decision with the Court of Appeals.

11 Either party filing an appeal shall file a courtesy copy of the appeal with the Administrative

12 Hearings Office contemporaneous with the Court of Appeals filing so that the Administrative

13 Hearings Office may begin preparing the record proper. The parties will each be provided with a

14 copy of the record proper at the time of the filing of the record proper with the Court of Appeals,

15 which occurs within 14 days of the Administrative Hearings Office receipt of the docketing

16 statement from the appealing party. See Rule 12-209 NMRA.

17

In the Matter of the Protest of George D. and Carol Scott, page 14 of 15.
1 CERTIFICATE OF SERVICE

2 On August 1, 2025, a copy of the foregoing Decision and Order was submitted to the parties

3 listed below in the following manner:

4 Email and First Class Mail Email and First Class Mail
5 INTENTIONALLY BLANK
6

In the Matter of the Protest of George D. and Carol Scott, page 15 of 15.